Paul Kanolik

Partner & Solicitor

DATE PUBLISHED: 04 May 2020 LAST UPDATED: 02 Dec 2021

Coronavirus and your Business Insurance

The COVID-19 Pandemic has caused unprecedented situations for many businesses both big and small with many undoubtedly suffering significant financial losses.

Businesses are looking to their insurers to see whether they are eligible to make a claim under their policy however, the Financial Conduct Authority (FCA) recently confirmed some, more basic business interruption policies taken out will not have provisions covering COVID-19.

In contrast there will be other policies where it is clear that firms do have an obligation to pay out on the policy. In such cases the FCA have highlighted that claims should be assessed and settled quickly so as not to exacerbate the financial pressure on policyholders.

It is however important to note that in some cases things may not be so clear cut, in such cases policy wording will be open to interpretation as to whether cover will be effective, which is likely to require a detailed legal analysis.

Some of Britain’s largest insurance companies have been faced with threats of legal action from small business owners who say
their legitimate business interruption claims have been unfairly turned down. Insurers have come under much criticism; however the tide seems to be turning with some insurers now reconsidering their stance on some policies.

Unfortunately there are some cases where this might just be too little too late for businesses, with the delay in any insurance pay-out only causing further financial losses.

What is the Enterprise Act 2016 and how can this help me?

The Enterprise Act 2016 inserts a new Section 13A into the Insurance Act 2015. This section imposes a duty on insurers to make prompt payment of claims, and means that policy holders will be able to claim damages if insurers breach that duty. The late payment provisions came into effect on 4 May 2017 and section 13A of the Insurance Act 2015 stipulates the following:

It is an implied term of every contract of insurance that if the insured makes a claim under the contract, the insurer must pay any sums due in respect of the claim within a reasonable time.”

Under the above provisions insurers will have a reasonable time to pay a claim. What insurers and those insured consider a reasonable time is open to interpretation and currently there is no guidance on what could constitute a reasonable time. It is likely that reasonableness will be determined on the following factors:

  • The type of insurance cover
  • The size and capacity of the claim
  • The date on which the insurer was notified of the claim (some insurers will have short notice periods)
  • Compliance with both Statutory and/or Regulatory Rules and Guidance
  • If the insured is able to successfully evidence and quantify their losses, which may be more difficult for business interruption claims
  • Any relevant factors outside of the Insurers control

It is worth noting that the right to claim damages is in addition to the right to claim interest for late payment. The obligation will be on the insured to prove that, on the balance of probability, any loss for which it claims damages was actually caused by the insurer’s breach of the implied term.

Whilst it is unclear what success late payment damages claims will have during the current climate, the threat of such claims to will undoubtedly put pressure on insurers to make a quick and early settlement, helping to minimise disruption.

How can Ellis Jones help?

Ellis Jones’ Banking & Finance Litigation solicitors have specialist knowledge and expertise across a broad range of areas acting for commercial clients in disputes with financial institutions. If you feel you may have a valid business interruption insurance policy covering COVID-19, and are unhappy with a decision from the insurer on your claim, please contact William Fox Bregman, or Paul Kanolik of our Banking and Finance Litigation Department on 01202 057738 or via an email at or with you enquiry.

How can we help?

When you submit this form an email will be sent to the relevant department who will contact you within 48 hours. If you require urgent advice please call 01202 525333.

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